Effects of Grey Market Watches

Gray market imports take a “free ride” on the consumer recognition and goodwill generated by a trademark or copyright holder’s investment in its watches. It is this work – – paid for and produced by the intellectual property owner alone – – that creates and maintains a market for the watch.

Consumer dissatisfaction arising from gray market imports intended for sale abroad – – which can differ in design, quality, intended usage, warranty coverage and more – – further diminishes the value of U.S. trademarks and copyrights. Gray market watches are almost never covered by the manufacturers warranty for domestic goods.

Gray market imports undermine the IP owner’s rights to control the manner and scope of the distribution of his work as guaranteed by U.S. statutes. In this way, gray market imports erode consumers’ investments in authentic watches purchased through authorized retailers.

Trademark and copyright protection is vital because it fosters continued creation of new mechanisms, products and designs that afford the consumer greater value and satisfaction.

Gray market distributors do not always pass along their “free-riding” profits to United States consumers. Like other economic actors, gray market importers charge what the market will bear, and it is not unusual to find gray market goods priced at or above the prices charged for authorized products, yielding direct returns for gray market importers at the expense of owners and consumers.

Consumer dissatisfaction arises because gray market goods are designed to conform to the laws, standards, and consumer preferences of the foreign countries in which they are intended to be sold.

Even if a gray market good is physically identical to its authorized counterpart at the time of manufacture, it can be damaged or altered at the point of sale because of poor shipment and handling or because of deterioration en route.9 For example, U.S. law requires that watches bear certain internal markings to be imported legally into the United States. See 19 C.F.R. § 11.9. Watches manufactured abroad may lack the required markings. Gray market importers therefore must open and mark the watches themselves, often in uncontrolled and unsterilized environments, thereby increasing the risk of defective performance.

Gray market watches often do not conform to U.S. statutes governing hazardous and toxic substances as lead, cadmium and mercury.